An ‘Appetizing’ Stock For a Stay-At-Home Economy

Shares of Goodfood Market Corp. (TSX:FOOD) have appreciated 61% since Capital Ideas wrote about the stock six weeks ago

Capital Ideas Media | July 31, 2020 | SmallCapPower: Goodfood Market Corp. (TSX:FOOD) popped onto our radar recently as a Canadian stock that should perform well during the COVID-19 lockdown.

(Originally published on Capital Ideas Media on June 16, 2020)

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[Editor’s Note: Shares of Goodfood Market have appreciated 61% since Capital Ideas wrote about the stock six weeks ago.]

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The online grocery company offers a subscription-based service, where customers receive free, weekly at-home deliveries that include ready-to-cook meal kits, ready-to-eat food, as well as private-label groceries.

Goodfood Market boasts farm-fresh ingredients and a variety of easy-to-cook meal options that cater to different tastes and dietary restrictions.

The Company’s most recently-reported quarter (Q2 2020), saw revenue surge 61% year over year to $58.8 million, while its net loss was nearly cut in half to $3.4 million.

Late last week, Desjardins Securities analyst Frederic Tremblay raised his target price for FOOD stock to $5.75 from $5 per share, while maintaining a “Buy” rating, saying Goodfood Market is “well-positioned” to benefit from the increased popularity of at-home meals and online grocery shopping stemming from the COVID-19 pandemic.

Mr. Tremblay also upped his financial expectations for the Company ahead of its third-quarter results, forecasting revenue for the quarter of $78.9-million, from $68.9-million previously, a 58% increase from a year ago, while estimating Adjusted EBITDA to rise to a loss of $1.2-million from a $3.6-million deficit.

“Importantly, we believe COVID-19 is also driving increased demand from existing customers, both in terms of order frequency and order size as more add-on products (e.g. private-label grocery items) are included in the baskets. We see pluses and minuses for 3Q margins, but overall, we believe that Goodfood can sequentially narrow its adjusted EBITDA loss as the strong top line and reduced marketing spend alleviate the initial pressures on operations (labour and ingredients) caused by the surge in demand,” he wrote.

On June 3, 2020, Goodfood announced its active subscriber count climbed 44% year over year and 11% quarter over quarter to 272,000 in May, exceeding Mr. Tremblay’s projection of 263,400.

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